New Age Beverages a standout in falling sector on plans to launch a line of CBD-infused drinks

Cannabis stocks were mostly lower on Wednesday, as the news that the Senate has approved a new U.S. Farm Bill that legalizes commercial hemp failed to ignite a rally.

Hemp is a type of cannabis plant that does not contain the psychoactive ingredient that produces the “high” associated with the substance, but does contain CBD, or cannabidiol, an ingredient that is widely held to have health benefits. The bill is expected to head to the House for a vote by next week and would remove hemp from the classification that has made it illegal at the federal level. Hemp can also be used in construction and plastics. THC, the psychoactive ingredient in cannabis, will not be affected by the new bill and it will continue to be classified as a Schedule I drug, along with heroin and cocaine.

Canopy Growth Corp. fell 0.1% despite a bullish note from Wells Fargo. Analyst Bonnie Herzog came away from an analyst lunch with management CGC, -3.41%WEED, -3.30% upbeat on the company and its partnership with Corona beer maker Constellation Brands Inc. STZ, -1.08% which has invested $4 billion in the company with plans to launch their own line of CBD-infused beverages.

The key takeaways from the lunch were that recent supply issues in Canada were due to government bottlenecks—provinces did not have the right infrastructure to take orders at the start of Canadian legalization of weed for adult recreational use in October, said Herzog. That shortfall contributed to Canopy Growth Corp.’s weak fiscal second-quarter revenue, she said.

Canopy is planning to launch its first trial of a CBD sleep aid in January, and expects the CBD-drinks line to launch in the fourth quarter. The company is aiming to develop a scalable, calorie-free and transparent beverage with a quick onset and long shelf life. The company has filed more than 140 intellectual property patents relating to cannabis and expects to be ready with more products in the second half of 2019.

“CGC has sufficient production assets in Canada (4.3M sq ft licensed production facilities with another 1.7M pending) and is “approaching” the end of its planned investments in Canada,” Herzoq wrote in a note. “And going forward, CGC to increasingly focus on developing its presence in international markets such as Germany, Italy, Colombia, Australia & Denmark.”

The cannabis market is expected generate more than $10 billion in sales in North America this year, a number expected to grow to about $23 billion by 2021. The North America illicit market, meanwhile, is expected to growth to more than $50 billion, “which presents a key opportunity should cannabis ever become legal at the federal level in the U.S.,” said Herzog.

The U.S. cannabis market is estimated to be about 10 times bigger than the Canadian market, which is enjoying first-mover advantage since fully legalizing the substance in October.

Cronos Group Inc. stock was down 2.8% and Tilray Inc. TLRY, -10.19% was down 4%. Aphria Inc. APHA, -5.37%APHA, -5.12% was down 1.8%, even after announcing a new supply agreement in Paraguay.

The Horizons Marijuana Life Sciences ETF HMMJ, -3.46% was flat, while the ETFMG Alternative Harvest ETF MJ, -2.37% was up 0.8%. The S&P 500 SPX, +0.54% was up 1.3% and the Dow Jones Industrial Average DJIA, +0.64% was up 1.3%.